The information on Groklaw is not intended to constitute legal advice.
While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice.
They are not your lawyers.

SCO's answer to Red Hat has been filed, and they said just what we predicted, that there is no actual controversy because they never intended to sue Red Hat, ha ha. I still have the collection we started to prove otherwise, and will post it all when I finish with our letter. Meanwhile, feel free to add any urls to stories that might well cause Red Hat to think SCO intended to sue them. It might really help. SCO also raises free speech issues, but it's got a problem there, because a commercial entity has lesser protection.

Here's an email just sent to me, and he has it just right, as far as the case is concerned:

"It should be interesting if this gets far enough to get into questions
raised, left unanswered in Nike v. Kasky...

"Seeing as how SCO is claiming free speech.."

A volunteer in the Delaware area has already stepped forward and will try to get us a copy of everything soon. I'll post it as soon as I receive it.

Meanwhile, it's back to work for me. Looks like we'll be ready with everything by tomorrow or Wednesday at the latest.

According to this article, dated August 28, 2002, Darl's didn't first think about legally pressing their IP claims long after they had their stock plan in place. It was virtually his first task on becoming CEO:

"The then-Caldera legal team was appointed the task of coming up with a review of the history of Caldera's intellectual properties and their status. The review turned up a stack of license agreements that had gone uncollected for years. To date (remember, McBride has been on board as CEO for only a few weeks), Caldera has already come to agreements with holders of these old licenses that will generate $600,000 in recurring revenue.

"The intellectual property fishing expedition has provided The SCO Group with the legal due diligence to now lay claim to UNIX itself. According to Opinder Bawa, new Senior VP of Technology, 'we own the source to UNIX; it's that simple. If we own the source, we are entitled to collect the agreed license fees.'"

It now appears, then that Bawa was not an uninvolved party who left in disgust. Rather, he appears to have been in support of the steps SCO was then taking. The timing issue is significant, namely that they already had approached and gotten monies from companies to the tune of $600,000. How does this match the millions for the two MS and Sun licenses? I don't know, but I hope someone finds out during the trial. The article also says that back then, McBride understood that Linux is not UNIX:

"To my fellow folk in the Linux community, you need not fear. I specifically asked if, in making that broad a statement about UNIX, The SCO Group was making any legal claim to Linux. According to McBride, 'obviously Linux owes its heritage to UNIX, but not its code. We would not, nor will not, make such a claim.'"

Of course, his word meant nothing, but his claim against Linux, judging by the SCOForum code fiasco, seems to be just as valueless as his promises turned out to be.

If you are interested in SCO's inhouse attorney, Ryan E. Tibbits, here's an article he wrote. He was involved, it turns out, in the Caldera, Inc. v. Microsoft Corp. case. He says winning a legal fight depends on careful review of documents. Hmm. I hope he's absolutely correct.

Darl McBride says the Linux community is countercultural. I think he needs to put on his spectacles and take a look around at the modern Linux world. Who make up the open source/free software communities today? For one, Ford, according to this article in the Scotsman, has just decided to join our side by switching from Microsoft to Linux:

"Ford is joining the ranks of governments and local authorities across the world that have switched from Microsoft software to the free open-source alternative Linux.

"The car giant will run its sales operations, human resources, customer relations management and the rest of its infrastructure operations on the upstart technology.

The article doesn't make clear if this is there in Europe only, or worldwide, But either way, those now using Linux include IBM, HP, Merrill Lynch, Verisign, Dell, Amazon, Google, Dreamworks, Ford Motors, the US Air Force, Los Alamos National Laboratory, the US Department of Defense, and, by the way, the town of St. George, Utah-- what a bunch of countercultural radicals, according to Dear Darl. Time to update your FUD, Mr. McBride. Here's a partial list of major companies, governmental agencies, foreign nations, municipalities and law enforcement agencies currently using Linux.

Both Microsoft and UNIX are feeling the heat from Linux, according to this article from India:

"But Linux, free from the institutional greed that killed Unix's chances, has thrived. And it has found some strong backers, such as IBM. To a lesser extent, HP, Dell, and so forth, have also jumped on the Linux bandwagon. . . .The net result is that today one can buy a Linux-based PC for far less money than a Microsoft Windows-based PC. It will, it is pretty much guaranteed, work much better, and be less resource hungry: you don't have to throw away your computer every couple of years just because Microsoft's new OS is a resource hog.

"Linux, with its compelling advantages, has put the brakes on Microsoft's attempts to dominate the server market as much as it dominates the desktop market. . . .

"It is probably a fair assumption that the original Bell Labs code is by now relatively obsolete, and that a lot new innovation has been added by the free software people. Therefore, it is probable that if this comes to a court hearing, SCO will lose."

Institutional greed killed UNIX, the writer says, not open source or the GPL. So institutional greed = a failed business model. I hope you are taking notes, Mr. McBride, since you say you are looking for a successful business model. The one you're backing is killing off UNIX, so the bottom line is this: Linux doesn't need old-fashioned UNIX. You, on the other hand, do need Linux. You might want to put that in your pipe and smoke it a while.

Mohammed Kateeb, regional director of Microsoft Middle East has just been interviewed by Gulf News ("the leading English language newspaper of the United Arab Emirates"), and the headline is "Linux Usage Raises Big Legal Concerns". He has the nerve to say this:

Linux people don't believe in Intellectual Property Rights. This is the biggest problem in the Linux world. How can one be sure that the code of software that has been contributed by programmers across the world to create this Linux software is unique and is not lifted from somewhere else? This is a big legal concern.

That is what the latest SCO-Linux lawsuit is all about. Now SCO is suing every single user of Linux because they believe parts of their UNIX code is being used in Linux. As a matter of fact, the Gartner Group came with a recommendation that every customer should stay away from Linux until this problem is sorted out. This is a serious issue. The model is broken basically.

But this is not all about it. Let's look at the impact on the economy. How do you expect local software companies in the Middle East to innovate and create a healthy software industry that exports world-class software abroad and get a return on their investment, when Intellectual Property Rights are not protected? Why would they employ people and do R&D in the first place if they can't get commercial returns?

So that's the big lie being told out there, that "Linux people" don't believe in "Intellectual Property Rights". I'm "Linux people". I believe in copyright, because it's the foundation on which the GPL is built. If Linux people didn't believe in intellectual property rights, then they'd release their software into the public domain. They have chosen instead to utilize the current intellectual property laws, copyright being the underpinning on which the GPL is built.

I would like SCO and Microsoft and all those proprietary dudes to get the message: please respect Linux kernel coders' copyright rights. Please respect the license that the Linux kernel coders have chosen to use, the GPL. If you do not -- and SCO is not -- then you do not respect "Intellectual Property Rights" as you call it. Let's call a spade a spade.

Since we are working hard this very weekend on our community answer to Darl McBride's Open Letter to us "Linux people", I thought everyone would like to know what is being said about us behind our backs, specifically by Microsoft. Maybe they thought we'd never see this interview in a Middle Eastern newspaper in Dubai. If so, they really don't get the internet age the way they think they do.

Sometimes it helps to clarify your thinking when the other side isn't subtle, and Mr. Kateeb lays it out pretty baldly. Of course, what he says is a lie, but who's counting? It's a helpfully egregious example of their FUD, not that SCO doesn't do a fine job with that already, but MS's Mohammed Kateeb has stated it in such a plain, simple way, it's clarifying in a way that trying to parse out what McBride "means" isn't, where there are always several tracks and layers -- what he said, what he didn't say, what he said last month, what he meant, what the truth actually is -- so Kateeb's unsophisticated remark makes a good, clear jumping-off point. You certainly aren't in any doubt as to his meaning. Maybe you have some questions about his truthfulness or his knowledgeability, but not his meaning. He also provides us a Window into Microsoft's "soul", or lack thereof, and a glimpse at their behind-the-scenes role in the SCO saga.

So... this is "the moral high ground"... I guess Darl must be marking on a curve or something.

Our community letter in answer to Darl's Open Letter to the Open Source Community is coming along, and so is the press list. We expect to have it done by Monday, if all continues to progress as it has been, so if anyone else has anything they'd like to say, now is the time. I have heard from several journalists already, expressing interest. I have tons of email too from readers, just full of great ideas and information. Here is some more space for further ideas, urls, press contacts, whatever you wish to add to the project. Say, this is fun, huh?

Computer World has an interview with McBride, in which he "explains" what he wants and what he meant in his open letter to the open source community.

All he wants is money. He wants to be able to tax Linux for the allegedly infringing SCO code, so he can ride on Linux's coattails and attain unimaginable wealth from the labor of others. He has observed that Linux is popular, it seems.

What he fails to grasp is, we don't want his code and would like him to tell us where he thinks it is, so it can be removed. We don't want to pay for SCO code, because we don't want SCO code. Is that so hard to grasp? Here is his position:

"Q: What is your best possible scenario to come out of the letter?

"McBride: It would be to have our intellectual property [IP] that we feel has been misappropriated into Linux getting valued, and we're then able to move forward. We're recognizing the clout that Linux is developing, the fact that it's a worldwide phenomenon and the fact that this can really be a new standard for computing in the business environment. To the extent that we're able to get recognition for what we feel is a significant amount of contribution ... we move forward together, and Linux is able to live and we're able to get recognition for our IP."

So that's his "olive branch", an offer you can't refuse without risking your life. Now there's a business model: force people to buy your product, even though they don't want it, Or Else. I think the Mob might have a patent on that business model already though. Sorry, SCO.

McBride still mistakenly thinks the GPL means free as in beer (he is so slow to catch on to things):

"If we're going into a new business environment around Linux, well, let's ask the question right upfront: Does the free business model work? Everything we've looked at, whether it's free Internet, free telecom, free music, all of these things tend to, for one reason or another, not work over an extended period of time. Clearly, the free model just about killed our company, and I would argue that it's going to kill a lot of other software companies if the GPL [General Public License] is able to gain a foothold and run rampant throughout the industry."

First of all, there is no "we" in this picture. Linux isn't going to partner with SCO under any circumstances. He needs to let go of that fantasy.

He also talks about SGI and the "attacks" and a number of other points in the interview, but I see no reason to give him space to spew his nonsense. I wish to set a good example for other reporters who just print whatever he says whenever he says it.

He reads Slashdot, he indicates, and it's apparently not his favorite part of the day. He can bear it, though, because:

"We believe we've got the moral high ground in this case, so that's what propels you forward."

? ! ? the moral.. sputter...the high...gasp...huh?

You know, I have a sister who doesn't understand the law. We are co-trustees on a trust. It's not a trust that benefits us. At least it isn't supposed to. No matter how many times I try to explain something to her, she still persists in thinking it's a different way, if she reeeeally wants it to be different. I guess money can twist your thinking. It's the bane of my life, because of the high frustration level and the sheer boredom of explaining the same thing over and over, to no apparent effect. McBride, however, has just taken the crown away from her for flat-out, knock-down illogical reasoning. The moral high ground in which alternate universe?

Maybe it isn't a lack of logic skills. Maybe it's like a cat I used to own. She was so sneaky and determined. If I had, say, fish on the counter, that cat would do simply anything to get it. She would try to jump up on the counter, and I'd spank her and say no, and she'd meow in protest, and then she'd walk away as if the matter was settled. But if I left my guardpost for one little minute, she'd be taking her chances and leaping for it again. In a cat, it was funny. Greed is funny in a cat, because you don't expect morals in a cat, so the more blatant they are with their determined greed, the funnier it is. They will go after what they want, no matter what, right or wrong. SCO is like that. They want to make some dough off of Linux. That's it. Take it or leave it.

Or maybe Linus is right. McBride just needs to grow up. Here's what Linus wrote in his Dear Darl letter:

"Dear Darl,

"Thank you so much for your letter.

"We are happy that you agree that customers need to know that Open Source is legal and stable, and we heartily agree with that sentence of your letter. The others don't seem to make as much sense, but we find the dialogue refreshing.

"However, we have to sadly decline taking business model advice from a company that seems to have squandered all its money (that it made off a Linux IPO, I might add, since there's a nice bit of irony there), and now seems to play the US legal system as a lottery. We in the Open Source group continue to believe in technology as a way of driving customer interest and demand.

"Also, we find your references to a negotiating table somewhat confusing, since there doesn't seem to be anything to negotiate about. SCO has yet to show any infringing IP in the Open Source domain, but we wait with bated breath for when you will actually care to inform us about what you are blathering about.

"All of our source code is out in the open, and we welcome you point to any particular piece you might disagree with.

"Until then, please accept our gratitude for your submission,

"Yours truly,

"Linus Torvalds"

Ah, the brushoff. Sorry, Darl, your "olive branch" has been officially declined. And with style and a sense of humor. But that invitation to show the code is serious, and you'd be well-advised to respond long before this goes to court. That's my opinion, which you are free to ignore, and, sigh, like my sister, you probably will.

Here is a revealing little tidbit from SCO's April 24, 2003 DEF 14A filing with the SEC, their Proxy Statment. It seems to explain why we get press releases from Utah with such regularity, threatening everyone and their little dog too. After each threat, the stock seems to shoot up. Why does Darl do this? What's in it for him? Take a look at what he gets if he manages to have four profitable quarters:

CEO Compensation.

In setting the total compensation payable to the Company's Chief Executive Officer for the 2002 fiscal year, the compensation committee sought to make that compensation competitive, while at the same time assuring that a significant percentage of compensation was tied to the Company's performance. The compensation committee reviewed industry compensation surveys for chief executive officers of comparable software companies to determine an appropriate compensation level. During fiscal year 2002, the Company hired Darl McBride, a seasoned technology veteran, to succeed Ransom Love as the Company's Chief Executive Officer. During fiscal year 2002, the base salary for Darl McBride was $250,000, which was later reduced to $230,000 as a result of salary cuts in the Company. Mr. McBride was also eligible to receive a quarterly performance award for reaching financial targets. The primary goals established for Mr. McBride included the successful attainment of revenue, and net income targets as established in his offer letter. These targets have been set very aggressively and will allow for Mr. McBride to earn from 20% to 300% of his base salary as a quarterly performance award based on attainment. During fiscal year 2002, Mr. McBride did not receive any quarterly performance award payments.

In recognition of the leadership and guidance Mr. McBride brings to the Company, he was granted 600,000 options to purchase shares under the Company's 1999 Omnibus Stock Incentive Plan. Of the options granted to Mr. McBride, 400,000 options vest 25% after one year with the remaining 75% vesting at 1/36 th per month thereafter, until fully vested. Of the remaining 200,000 stock options granted to Mr. McBride, 50,000 options will vest one year from the date of the Company's first profitable quarter (as long as that profitable quarter is before Q4 of fiscal year 2003) and the remaining 150,000 options will vest one year from the date the Company achieves four consecutive quarters of profitability (as long as the fourth quarter is before Q4 of fiscal year 2004).

Now, this may prove to be very remunerative for Darl, particularly since the options he was granted on the 600,000 shares last year were at 76 cents a share, but is it a good business model? He has had two profitable quarters, thanks to the Sun and Microsoft licenses, and no doubt he'd like to have four. There does seem to be something wrong with an arrangement that puts the short-term personal interests of executives in a company so at odds with the long-term interests of the company itself and against the interests of the public at large.

SCO as a company is committing suicide before our eyes. No one in the open source/free software worlds will want to do any business with them from this day forward. That is a given. I wonder if they know how much business that will cost them? Here is an article on how to persuade your executives to switch to Linux. Here is an article on how to help SCO's poor customers make the switch to Linux, so they aren't left up the creek without a paddle, and notice one of the commenters says he just quietly recommends anything but SCO products, and that so far, just since this all began, they have "lost 58 OpenServer licenses over four customers because of me".

Here is economist Amy Wohl writing that "The Open Source Community Has a Business Model". And speaking of successful Linux business models, IBM has just signed a deal with Red Flag Linux too, just as HP recently did:

"Given the size of China's economy and the related growth of information technology infrastructure, Red Flag could become the most widely deployed Linux distribution," said Stacey Quandt, an independent Linux analyst.

Proprietary Microsoft is sulking but also trying to woo China, the article says, using a technique that validates the open source method:

Microsoft, which has criticized China for not doing enough to curb software piracy, is trying to court Chinese customers, but Linux has the advantage that its core components are available for free. Microsoft also is trying to allay concerns by letting Chinese officials view Windows' underlying source code, a move that acknowledges one advantage of Linux and its open-source development process.

SCO's other buddy, Sun, keeps trying to figure out new ways to graft olde business methods on to Linux. That is, of course, the same mistake Caldera made with its per seat license "brainstorm" that made it impossible to make money from their Linux product. You can't graft the two styles together, but that doesn't stop the dinosaur brigade from perpetually trying, as long as they have any breath in them. Now stuck-in-the-mud Sun would like to offer indemnity from SCO lawsuits, but there is a catch:

Sun is contemplating adding an unusual provision to some of its Java licenses under which the company would agree to protect licensees from Linux-related lawsuits filed by the SCO Group. . . .

A Sun representative said the program, if executed, would likely apply only to Java 2 Micro Edition, Sun's version of Java for gadgets including cell phones and embedded devices such as electronic billboards.. . .

Sun has publicly stated on several occasions that it will indemnify its Solaris customers against any liability. Customers that adopt Mad Hatter, an upcoming Sun desktop software suite, also will be indemnified, Schwartz said. . . .

When it comes to Linux, however, Sun server customers are on their own. The company does not provide indemnity to Sun server customers who choose to run Linux, rather than Solaris, on its servers. Sun sells servers that run Red Hat's Linux.

Sun, in fact, will try to erode Linux's growth in the marketplace by promoting a version of Solaris that runs on servers with chips from Intel or Advanced Micro Devices.

[emphasis added]

In case you were wondering where Sun stands, now you know. They are desirous of "eroding Linux's growth in the marketplace". Still believe Sun isn't behind this SCO stuff?

As usual in the proprietary software world, there is no honor. And you'd best read the fine print. It seems Sun hasn't exactly explained just how the indemnification will work:

Sun could request that Java customers seeking indemnity switch from using Linux to Solaris. Sun could also, conceivably, devise a Linux-like OS, or it could pay additional royalties to SCO. . . . However, Sun's license only extends to Solaris, said SCO spokesman Blake Stowell, not to Java related products or any as-yet-created version of Linux from Sun.

Doesn't it just make you want to gag, once you grasp the hustle? You are "indemnified" by switching away from Linux altogether and on to Solaris. What a deal. Thanks, but no thanks.

Those proprietary software dudes are so smarmy. Maybe that used to work, before the internet. But it's going the way of the dodo now. Darl wrote about mainstream values, but the values reflected in proprietary business methods reveal the stream is polluted. Who wants to do business with people like that? Who even dares to?

And now nobody has to. What I love about GNU/Linux is, there is no fine print. There is no hustle. And there is honor. That alone is a business proposition worthy of your consideration.

Why SCO May Be In No Hurry To Invoice Australia or Austria-- "The Laws, They Be Different Over Here, Mate"

Andrae, a friendly Aussie engineer gathered up some information about Australian law, which he found on this thread. Obviously, I know nothing about Australia's laws, but I am willing to learn, and what he writes certainly does seem to throw some light on why SCO may not be in any hurry to send invoices to anyone down under. Here is the email from Andrae, which he has given me permission to share:

"As you are trying to understand the disconnect between .au and .us SCO I thought this might help. You need to be aware that, in Australia, Trade Practices lawyers know sect.53 by heart.

"Also the ACCC (Australian Consumer and Competition Commission) is apparently very interested in hearing from anyone invoiced in Australia.

"I'm an engineer who's been involved in his local LUG since he helped found it 8 years ago. I noticed that you still seemed to be puzzling
over the different signals coming from SCO.au and SCO.us, personally my
take on it is that SCO.au has learnt the lesson of SCO.eu... 'The laws,
they be different over here mate.' ; ) "

Speaking of Europe, another Groklaw reader, Gerhard writes that the Organization for Free Software (FSS) in Austria has begun taking legal steps against SCO:

"According to Pro-Linux.de , the FFS (Organisation for Free Software) Austria (not Germany as in that text - you know, there are already preliminary injunctions against SCO GmbH Germany), is starting legal actions against SCOs 'Intellectual Property License'."

That site is in German, but another reader, Thorsten, steps forward to help out by giving us this unofficial translation into English:

"In a letter to the lawyer the Association for the Promotion of Free Software (FFS) forbids SCO Germany the sales of licenses for Linux which deviate from the GNU general Public License.

"This applies in particular the 'Intellectual Property License' that is illegally advertised by SCO Germany on the web page www.caldera.at.

"In an ultimatum FFS permits the enterprise for the last time to avert civilian and criminal pursuit from SCO Germany and the leading employees by the association for licenses already issued which do not correspond to the GNU General Public License.

"The conditions cover also the repayment of license fees already raised to the customers and a public clarification which must contain the sentence: 'the claims of SCO against Linux, spread by SCO Germany, are groundless'.

"If SCO Germany violates this prohibition, then, as soon as a sale of the advertised license can be proven, both SCO and its leading employees are threatened by pursuit because of violation of copyright.

"The prohibition is supervised by the association. Members and companies from the association's environment will conduct test purchases. 'We additionally ask customers who have obtained a "Intellectual Property License" or a similar secondary/ancillary license for Linux to contact the association at freedom2innovate@ffs.or.at', said the FFS."

I have written to FFS to ask them to clarify the news. I will share whatever I learn. Meanwhile, we catch the drift, namely, as Andrae says, "The laws, they be different over there, mate." Also, we understand that if anyone in Australia or Austria gets a SCO invoice, there are some folks who'd like to hear from them.

The US is not entirely without laws itself. I stumbled across this Utah law regarding securities fraud, and I am putting it here as part of Groklaw's effort to make a complete record. I wasn't aware that Utah also monitors such matters, as I was under the impression that only the SEC did that. But you know by now, I'm not an expert in this area. Perhaps other states have such laws too. Here is the section dealing with Utah's law against securities fraud:

"§ 61-1-13(24) of the Utah Uniform Securities Act

"61-1-1 - Fraud unlawful

"It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly to:

"(1) employ any device, scheme, or artifice to defraud;

"(2) make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or

"(3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person."

I found this law on the State of Utah Division of Securities website. Of course, this law is for those who feel they've "lost money as a victim of an unlawful stock transaction" as the complaint page phrases it, not just those of us morally offended by fraud and untrue statements. Some things the law leaves to God.

I don't personally own any stock in SCO, and I am positive I never will, not even if it seemed like it'd go straight to the moon for me, so this law has no impact on me, not even if they were to be found guilty someday of the crimes enumerated, and that's probably true for the rest of you reading this. But I can imagine that maybe, when this is over, someone who has a by-then useless certificate will send it to me, so I'll have a nice memento to frame and hang on my wall, to remember SCO by -- nah, scratch that -- to remember the history we witnessed together and the permanent record we made of it here.

One thing McBride doesn't lack is chutzpah, and so he has written a crafty
open letter to "the Open Source Community". Ostensibly, he would like you to work with SCO to develop a business model for open source software:

A sustainable business model for software development can be built only on an intellectual property foundation. I invite the Open Source community to explore these possibilities for your own benefit within an Open Source model. Further, the SCO Group is open to ideas of working with the Open Source community to monetize software technology and its underlying intellectual property for all contributors, not just SCO.

That of course sounds a little fishy, coming from McBride, who has not evidenced a deep concern for Linux or its coders to date. It's sounds more like the spider inviting the fly to step into the web "to do lunch".